In the financial services industry, sell-side firms have traditionally priced the non-execution services that they provide to their clients (e.g., equity research) by bundling the non-execution services with execution services, such as the buying and selling of securities, etc. According to typical bundling arrangements, clients (e.g., buy-side firms) pay the sell-side firm suitable compensation, for example, in the form of a fee and/or commission. In exchange for the compensation, the clients receive execution services as well as certain non-execution services, such as access to equity and other financial research.
For various reasons, these traditional bundling arrangements have begun to fall into disfavor. The Financial Services Authority (“FSA”) of the United Kingdom has implemented regulations that will soon require many buy-side firms to disclose the amount of money that they spend on execution services and the amount of money that they spend on non-execution services, such as research and sales coverage. Accordingly, buy-side firms subject to the U.K. regulations must be able to break out their expenses related to execution and non-execution services respectively. Also, under typical bundling arrangements, research and other non-execution services are a cost center to the sell-side firm, and not a profit center. Accordingly, there is a need for improved pricing and resource allocation systems for non-execution services.